Comerica Economic Weekly

Like a polar vortex, the official December jobs report from the Bureau of Labor Statistics puts a big chill on our previously sanguine economic outlook. Payroll jobs increased by just 74,000 in December. Countering some of the December freeze, November payroll gains were revised up from a solid 203,000 to a strong 241,000 jobs. The pattern in the jobs data suggests that two forces were at work in keeping December payroll gains well below expectations. First was the strong November rebound from the October government shutdown. The strong November numbers look like they pulled some jobs in from December. Also, the bad winter weather in early December looks like it was a factor. As a result of a large 347,000 worker decline in the labor force, the unemployment rate fell unexpectedly to 6.7 percent for the month. This DOES NOT MEAN that the Federal Reserve is only a couple of clicks away from raising the fed funds rate. FOMC officials will view the improved unemployment rate with a great deal of circumspection. More weather effects look likely in the January jobs data.

President Obama is reported to be readying the nominations of three governors for the Federal Reserve’s seven-member Board of Governors. Stanley Fischer will be nominated to replace Janet Yellen as vice chair. Yellen will replace Ben Bernanke as chair of the BOG in March. Fischer comes with a resume chock full of international banking experience including the governorship of the Bank of Israel and Chief Economist of the World Bank. Jerome Powell is currently on the Fed’s Board of Governors, filling a vacated term that ends at the end of this month. He will get a full term of 14 years, pending Senate approval. Lael Brainard also comes with international credentials. She is formerly the Undersecretary of the Treasury for International Affairs.

Sarah Raskin is still on the BOG, but she has been nominated by President Obama to be Deputy Treasury Secretary, pending Senate approval. When she leaves the BOG, likely soon, President Obama will have one remaining spot to fill. In addition to Powell, continuing on the BOG will be Jeremy Stein and Daniel Tarullo.

Voting members of the Federal Open Market Committee consists of the seven governors plus the New York Fed President, now William Dudley, plus four other regional Federal Reserve presidents. At the upcoming January 28/29 FOMC meeting, four new regional Fed presidents will rotate on as voting members of the FOMC, while four rotate off. Rotating on will be Richard Fisher of Dallas, Charles Plosser of Philadelphia, Narayana Kocherlakota of Minneapolis and Sandra Pianalto of Cleveland. Pianalto will retire early this year. Her replacement is unknown at this time. Rotating off as voting members are James Bullard of St. Louis, Esther George of Kansas City, Charles Evans of Chicago and Eric Rosengren of Boston.

For a PDF version of the Comerica Economic Weekly, including forecast tables and the variables calendar, click here:CMAEconWeekly011014.